Photograph: Bloomberg/Getty Images
Closing summary
Time to wrap up for the day. Here’s a quick summary of the main events.
UK retail chief Mike Ashley has tightened his grip on Debenhams, by forcing the struggling retailer’s chairman to resign.
The move came hours after Debenhams and Marks & Spencer both reported falling sales over the crucial Christmas period, while Halfords hit shareholders with a profits warning.
John Lewis added to the angst, by warning that its staff bonus might be axed for the first time since the 1950s.
Britain’s car industry has been hit by two blows -- Ford and Jaguar Land Rover are both cutting jobs, as they try to cope with China’s slowing economy, the diesel crisis, and Brexit.
Goodnight. GW
The Financial Times points out that Debenhams has lost 90% of its value on Cheshire’s watch:
Sir Ian became chairman in April 2016, having previously been chief executive of DIY conglomerate Kingfisher. He was joined by Mr Bucher later that year.
Since then, the stock has lost roughly 90 per cent of its value amid a series of profit warnings, and pre-tax profit has fallen from more than £100m to £32m last year.
A new strategy, termed Redesigning Debenhams, was launched in April 2017, aiming to increase digital sales, close underperforming stores and reduce reliance on price promotions.
However, a downturn in consumer sentiment after the Brexit referendum and a rapid shift of shopping online left the company fighting for its future.
Over in the eurozone, German chancellor Angela Merkel has paid a visit to Greece - almost 10 years after its debt crisis began.
Amid high security in Athens, the visit is going smoother than Merkel’s last trip, when there were mass protests, cartoonists portraying her as Hitler and demonstrators donning Nazi garb.
My colleague Helena Smith explains:
Hailing the progress the debt-stricken had made in the almost ten years since receiving the first of three bailouts, the German leader found it hard to suppress a smile. Tsipras, also smiling broadly, declared that the two-day official visit marked the end “in a difficult cycle of relations between our two countries.”
Both leaders will be addressing the media later this PM before Tsipras treats Merkel to dinner in the picturesque Kastella district in Piraeus. As yet, nobody knows if it will be an austerity meal.
Trump ditches Davos trip
Yet more news! Donald Trump has just pulled out of attending the World Economic Forum in Davos later this month.
He had been due to give a keynote address for the second year running, but has now ditched the plan due to the ongoing government shutdown.
Because of the Democrats intransigence on Border Security and the great importance of Safety for our Nation, I am respectfully cancelling my very important trip to Davos, Switzerland for the World Economic Forum. My warmest regards and apologies to the @WEF!
— Donald J. Trump (@realDonaldTrump) January 10, 2019
Retail analyst Andrew Busby reckons Mike Ashley has moved a step closer to folding Debenhams into his empire, having already acquired House of Fraser last year.
Debenhams (not so quietly) steadily imploding. Extraordinary goings on at the AGM today but it seems that Mike Ashley's patience has finally all but evaporated. Couldn't really imagine him having a beer with Sir Ian.
— Andrew Busby - The Retail Influencer (@andrewbusby) January 10, 2019
House of Debs moves a step closer to becoming a reality.
One odd thing about today’s City bloodletting: Sports Direct doesn’t own enough Debenhams shares to purge the board on its own (just 29.7%).
Ashley has been forced to keep his shareholding below 30%, to avoid being forced to launch a full takeover bid for a listed company.
Landmark, which also voted against chairman Cheshire and CEO Bucher, owns 7%.
That’s still not enough for a majority...unless other shareholders don’t vote at all, which is what appears to have happened.
Veteran retail analyst Nick Bubb thinks Debenham’s advisors blundered badly today by not getting enough support for their top brass.
Mike Ashley and Landmark only have 38% of Debenhams shares, so they shouldn't have been able to vote down poor old Ian @cheshii This is a shocking result for Debs' advisers, who clearly failed to get enough proxy votes in the bank before the AGM
— Nick Bubb (@NickBubb1) January 10, 2019
Here’s the voting at Debenhams’ AGM:
Suzy Ross, senior advisor at Accenture Retail says Debenhams woes are a “cautionary tale” for other retailers.
“The dramatic and sustained decline in Debenhams’ fortunes in the last 3 years is not simply down to wider physical retail market challenges.
Department stores are one of the hardest and most complex sectors of retail – and they require deep specialist experience to be successful. In a headlong rush to create new customer experiences - such as prioritising mobile and premium store experiences - losing sight of getting the product and proposition right for loyal, valuable customers has been costly.
Terry Duddy, who is replacing Cheshire as interim chairman, says he recognises that “individual shareholders” (yes you, Mr Ashley) have “wished to register their dissatisfaction”.
Duddy adds:
My first task is to meet with shareholders so that I understand any concerns that they may have.”
Sir Ian Cheshire’s forced departure from Debenhams follows an extremely poor year for the company.
Debenhams issued three (!) profit warnings in 2018, as the high street chain struggled to cope with changes in the retail space.
Its share price has plunged from 36p a year ago to just 4.8p today, driving its market capitalisation below £60m.
The company also owes around £300m, and is trying to hammer out a wide-ranging restructuring plan that will involve store closures, thousands of job losses, and a debt restructuring.
The news that Debenham’s suffered a 3% drop in sales over Christmas may have been the last straw for Mike Ashley, who has built up a near 30% stake in the company.
Updated
More reaction to the boardroom putsch at Debenhams:
“Your job is on the line, sir,” one shareholder told Sir Ian Cheshire at #debenhams AGM earlier this afternoon. Now he is gone. https://t.co/7gfaTprW6S
— Michael O'Dwyer (@mxodwyer) January 10, 2019
So Mike Ashley's Sports Direct has helped vote to get rid of Debenhams Chairman Sir Ian Cheshire.
— Sean Farrington (@seanfarrington) January 10, 2019
One of Debenhams longest standing concessions/designers told @bbc5live that he's is a fan of Mike Ashley https://t.co/3LrIItQ56u
Debenhams chairman ousted by Mike Ashley
Newsflash: City veteran Sir Ian Cheshire has just been dramatically ousted as chairman of Debenhams.
Just hours after reporting falling sales at Christmas, the struggling retailer has revealed that a majority of shareholders voted AGAINST Cheshire’s reelection at an AGM today.
That’s because Sports Direct, controlled by Mike Ashley, used its 29.7% shareholding to oppose Cheshire, and also Sergio Bucher, Debenham’s CEO.
Another major shareholder (thought to be Dubai-based Landmark) also voted against the pair.
Debenhams says:
Given the decision of two major shareholders who voted against his re-election to the board, Sir Ian has concluded it is no longer possible for him to remain Chairman of Debenhams plc.
Huge retail news- Debenhams chairman Sir Ian Cheshire and chief executive Sergio Bucher has been voted off the board; Bucher to stay on as chief executive, however, and report to the board.
— Pui-Guan Man (@PuiGuanM) January 10, 2019
Cheshire has fallen on his sword, and will be replaced by director Terry Duddy.
Bucher is staying on as CEO, though, despite only getting 44% of the vote (Cheshire accrued just 43%).
Debenhams says:
The board is mindful of its responsibilities to all shareholders and has full confidence in Sergio and in the management’s plan to reshape the business. As a result, the board and Sergio have agreed that he should continue as CEO of Debenhams plc, reporting to the board.
This dramatic development puts Debenhams into a fresh crisis. Before Christmas, Ashley revealed he was pushing the company to accept a £40m loan, warning it might not keep operating otherwise.
Blimey. Late development - Debenhams' chairman Ian Cheshire steps down after shareholders vote against his re-election following a car-crash year for the retailer.
— Hannah Uttley (@huttleyjourno) January 10, 2019
Updated
More car news. Japanese carmaker Honda will halt UK production for six days in April due to Brexit logistics and border disruption, according to Sky News.
Honda typically holds just one hour’s worth of parts at its factory in Swindon, so new friction at the UK border would be a big problem. Last year, it told MPs last year that every 15 minutes of customs delays would cost some manufacturers up to £850,000 a year.
Honda to stop production for six days after Brexit https://t.co/XPZmWKt9yH
— Sky News (@SkyNews) January 10, 2019
Andy Street, West Midlands mayor, is hopeful that JLR will remain committed to the UK, despite its heavy job cut plans.
He also fears deeper job cut, if a Brexit deal isn’t agreed in time.
Today’s news will be particularly difficult for the Jaguar Land Rover workers and their families affected by this announcement. The decline in sales and job losses are disappointing given the vital importance of JLR to the West Midlands economy.
— Andy Street (@andy4wm) January 10, 2019
Nevertheless, I am confident Jaguar Land Rover will be a critical part of our region’s future success. I know the Tata Group and JLR are committed to manufacturing in the West Midlands and to developing a new generation of electric and hybrid vehicles.
— Andy Street (@andy4wm) January 10, 2019
The billions of pounds invested in recent years, the current £500m investment in Solihull, and the new announcements today of the Battery Assembly Centre at Hams Hall and the investment in Electric Drive Unit production at Wolverhampton are clear evidence of that commitment.
— Andy Street (@andy4wm) January 10, 2019
I am working closely with local authorities and the Government to support Jaguar Land Rover as they make the move to building electric and hybrid vehicles.
— Andy Street (@andy4wm) January 10, 2019
In the last 18 months, we have supported the long-term future of the West Midlands car industry with significant public investments in the UK Battery
— Andy Street (@andy4wm) January 10, 2019
Industrialisation Centre, 5G and autonomous vehicle testbeds, and the UK
Mobility Data Centre.
Though the challenges faced by JLR are global issues, such as declining sales in China and declining diesel sales, this news acts as a reminder that it is vitally important to the West Midlands of securing a Brexit deal which allows frictionless trade between the UK and the EU.
— Andy Street (@andy4wm) January 10, 2019
JLR’s Ralf Speth is being quizzed about Brexit.
Speth says he doesn’t know what will happen in March, but there will be “huge implications” if a hard Brexit occurs.
He also concedes that Brexit is a factor behind today’s announcement, pointing out that UK car sales have fallen 7% in the last year. China and diesel are bigger issues, though,
Asked if JLR is hoarding parts in preparation for Brexit disruption, Speth says it is stockpiling, but enough for a few days not several weeks.
Q: Is JLR stockpiling?
— Peter Campbell (@Petercampbell1) January 10, 2019
Speth: JLR has 25m parts a day. JLR is stockpiling in "days, not weeks", and says variance of customer orders makes it difficult to stockpile far in advance.
JLR holds conference call
Jaguar Land Rover boss Ralf Speth is holding a conference call with journalists now.
On it, he says:
- JLR is committed to growing its UK business; the company is, and will remain, a British company
- It faces three serious challenges: the slowdown in China, the fall in diesel sales, and Brexit (as explained earlier).
- The restructuring, and 4,500 job cuts, announced today will create a leaner organisation, reducing costs and allowing faster decision making.
On the job cuts, Speth says JLR is already consulting with unions about voluntary redundancy, and early retirement packages.
Updated
There’s retail gloom on both sides of the Atlantic today.
US retail group Macy has sent shockwaves through Wall Street today by reporting weak sales over the Christmas holiday period, forcing it to cut its 2018 earnings outlook.
This has sent Macy’s shares plunging by 18%, with other retails also suffering as traders worry that US consumers are cutting back.
US retail getting taken out to the wood chipper
— Michael Hewson 🇬🇧 (@mhewson_CMC) January 10, 2019
Macy's -18%
Kohl's -8.5%
Nordstrom -8.5%
Target -4.5%
Abercrombie and Fitch -11%
JC Penney -5%
Stocks open lower, retailers lead declines as Macy's plunges 18% and Kohl's drops more than 9% https://t.co/QGbxSEeIuz pic.twitter.com/8mG440luey
— CNBC Now (@CNBCnow) January 10, 2019
Dame Caroline Spelman (MP for Meriden) and Jack Dromey (MP for Birmingham Erdington), who both have many Jaguar Land Rover workers in their constituencies, have issued a statement on the JLR job cuts.
“It is, of course, bad news that Jaguar Land Rover is being forced to make further job cuts.
Since Tata took over the company in 2008, it has gone from strength to strength, creating thousands of jobs in Meriden, Erdington and across many other areas of the UK, transforming the lives of tens of thousands of local people
However, recent years have been difficult. Falling sales in China due to global trade wars as well as changing consumer attitudes to diesel vehicles have been damaging.
These difficulties have been compounded by the continuing uncertainty over Brexit.
Unfortunately, as we get ever closer to March 29, it becomes clearer that if we crashed out of the EU without a deal, announcements like today’s would become widespread and would be devastating for British manufacturing.”
Unions are urging the government to provide more assistance for the car industry.
Unite national officer Des Quinn says workers at JLR have endured “a great deal of uncertainty over recent months,” adding:
“With record levels of new investment and models set to come on stream in its UK factories we look for Jaguar Land Rover to continue to be a global success and the jewel in Britain’s manufacturing crown.
“Britain’s car workers have been caught in the crosshairs of the Government’s botched handling of Brexit, mounting economic uncertainty and ministers’ demonisation of diesel, which along with the threat of a no-deal Brexit, is damaging consumer confidence.
How China slowdown and diesel crisis hurt JLR
JLR’s sweeping job cuts follow a double-whammy of problems, with Brexit uncertainty adding an extra garnish.
The carmaker has been badly hit by the diesel crisis, which began in 2015 when German manufacturer Volkswagen was caught cheating on its emissions tests. That scandal has dented demand for diesel (UK sales fell 30% last year.
That’s a huge blow to JLR, as 90% of its vehicles ran on the fuel. Critics say it was relatively slow to embrace electric cars - a move that is now looking critical, with some cities considering banning diesel, and even petrol, cars in the years ahead.
JLR is also vulnerable to the slowdown in China. Donald Trump’s trade war has hurt the Chinese economy - yesterday we learned that car sales in China fell in 2018, for the first time in at least two decades. Economists fear a ‘hard landing’ in China that could crush consumer demand, and send ripples through the global economy.
Plus there’s uncertainty over Britain’s exit from the EU. UK car sales also fell last year, for the second year running.
Today’s disappointing Christmas trading figures from John Lewis and Marks & Spencer have highlighted that shoppers are being cautious. Plus the car industry is very dependant on ‘just-in-time’ supply chains, which would be hurt by trade friction at the UK border.
The JLR story is bigger than Brexit, but make no mistake global trade wars and massive supply chain and customs uncertainty have made it worse.
— Jess Phillips (@jessphillips) January 10, 2019
Here’s the details of JLR’s new investment in electric car technology, announced alongside its job cuts plan.
Later this year, next-generation Electric Drive Units (EDU) will be produced at the company’s Engine Manufacturing Centre in Wolverhampton. These EDUs will be powered by batteries assembled at a new Jaguar Land Rover Battery Assembly Centre located at Hams Hall, North Warwickshire, reinforcing the company’s commitment to the West Midlands and the UK.
“The Battery Assembly Centre will be one of the largest of its kind in the UK, using new production techniques and technologies to manufacture battery packs for future Jaguar and Land Rover vehicles.
JLK is planning to begin a voluntary redundancy programme in the UK, to remove layers of management.
It says:
“This strategic review will create a leaner, more resilient organisation with a flatter management structure.”
CEO Ralf Speth has also promised that JLR will deliver “a future range of British-built electric vehicles”.
Many of JLR’s UK job cuts will affect management roles, including at its sites in Coventry and Gaydon, Warwickshire.
Updated
UK badly hit as Jaguar confirms job cuts
BREAKING: Jaguar Land Rover have confirmed that they, like Ford, are cutting jobs...and the axe will fall heavily on the UK.
JLR plans to cut around 4,500 roles around the globe, as part of a major cost-cutting programme designed to save £2.5bn.
JLR says it is responding to “multiple” geopolitical and regulatory disruptions (eg China’s slowing economy), and to the technology changes facing the sector (such as the move to electric and self-driving cars).
Chief executive Ralf Speth says:
“We are taking decisive action to help deliver long-term growth in the face of multiple geopolitical and regulatory disruptions as well as technology challenges facing the automotive industry.”
JLR, which employs about 40,000 people in Britain, has also announced a new battery assembly centre at Hams Hall near Birmingham, and will begin producing electric drive units at its Wolverhampton engine plant.
The looming job cuts at Jaguar Land Rover have been raised over at parliament.
Theresa May’s spokesman has told reporters that JLR sees the UK as “home”, and is committed to the country, saying:
“JLR have been very clear that they regard the UK as home and are investing in the future to develop the next generation of vehicles.
We will continue to work closely with the company to support their long-term plans.
That doesn’t rule out some layoffs, though....
Ford has also warned that the European market is tough - persistently so - meaning sweeping changes are needed.
The FT’s Peter Campbell has the details:
Armstrong on European market: We're seeing softening in some markets, like the UK, it's tough from a competitiveness position. That's why we need to think about how we're going to compete in the future.
— Peter Campbell (@Petercampbell1) January 10, 2019
Steve: "Ford of Europe has never really been sustainably profitable. This was not a one-time policy. We can only allocate capital to places we're going to get a return."
— Peter Campbell (@Petercampbell1) January 10, 2019
Armstrong says likely to have specifics of cuts around second quarter/into the middle of the year.
— Peter Campbell (@Petercampbell1) January 10, 2019
Ford: No-deal Brexit would mean 'more dramatic' cuts
Ford is holding a conference call with journalists now.
On it, European chief Steven Armstrong has warned that further job cuts might be needed if Britain crashes out of the EU without a deal.
First Q - "I have ask...does Brexit colour your view of the UK operation?"
— Peter Campbell (@Petercampbell1) January 10, 2019
Armstrong: "If we get wrong result, then expect that results will be significantly more dramatic. This is fix the base business."
👆🚨🚨 THIS IS SIGNIFICANT 🚨🚨
— Peter Campbell (@Petercampbell1) January 10, 2019
Economist Andrew Sentance says the job cuts at Ford and JLR are part of a broader trend towards automation:
Latest wave of job cuts in manufacturing (Ford, JLR) is no great surprise. Manufacturing jobs will continue to decline as automation (robots) take over and 90pc jobs will be in services industries by 2030. Ford to cut thousands of jobs in turnaround plan https://t.co/BCAknVNPQf
— Andrew Sentance (@asentance) January 10, 2019
In other blow to Europe’s auto sector, Jaguar Land Rover is set to announce heavy job losses too.
A source familiar with the plans has told us the redundancies were likely to affect “white-collar” workers the most, with the majority of UK job reductions achieved via voluntary redundancies.
Here are more details of Ford’s cost-cutting plans -- including likely job losses in the UK:
- Production at the Ford Aquitaine Industries plant in Bordeaux, France, which manufactures small automatic transmissions, will end in August 2019.
- Formal discussions have begun between Ford and its Works Council to end production of the C-MAX and Grand C-MAX at the Saarlouis Body and Assembly Plant in Germany as the compact MPV segment shrinks in Europe.
- Ford is undertaking a strategic review of Ford Sollers, its joint venture in Russia. Several significant restructuring options for Ford Sollers are being considered by Ford and its partner, Sollers PJSC. A decision is expected in the second quarter.
- Ford plans to consolidate its UK headquarters and Ford Credit Europe’s headquarters at the Ford Dunton Technical Center in South East Essex to improve business fitness and create a customer-centric technical hub. The action is subject to union consultation and local approvals.
It’s official....
We are taking decisive action to make #Ford sustainably profitable in Europe, working collectively with all stakeholders to deliver a more focused line-up of European-built passenger vehicles, while growing our import and commercial vehicle businesses. https://t.co/39tgKKt8gs
— Steven Armstrong (@StevenArmstrong) January 10, 2019
There’s a serious danger that Ford could close some of its European car factories.
Steven Armstrong, Ford’s head of Europe, has told Bloomberg:
“We are looking to make a step-change in the performance of the business.
“There’ll be significant impact across the region. We will be looking at all options.”
Ford to slash thousands of jobs
Breaking news: carmaker Ford is slashing thousands of jobs across Europe.
The carmaker has just announced the job cuts, as part of a new strategic plan that will see it quit unprofitable markets and ditch loss-making vehicle lines.
Steven Armstrong, Group Vice President,Europe, Middle East and Africa, says.
“We are taking decisive action to transform the Ford business in Europe,”
Under the plan, Ford plans to combine the headquarters of Ford U.K. and Ford Credit to a site in Dunton, Essex.
It is also intending to exit the multivan segment, stop manufacturing automatic transmissions in Bordeaux in August, and review its operations in Russia.
Ford expects to lose “thousands of staff” under the plan, and will aim for voluntary redundancies where possible.
It currently employing some 54,000 workers across Europe, mainly in Germany, the U.K. and Spain.
There are some encouraging signs in John Lewis’s statement, despite the damage to profits this year.
Its department stores (John Lewis & Partners) grew like-for-like sales by 1% over the Christmas period, with fashion sales up 6.8%, beauty products up 11.2%, and own-brand womenswear up 14.7%.
However, the “intensively competitive pricing environment” meant profit margins were squeezed.
John Lewis’s ‘never knowingly undersold’ pledge means it has to match rivals’ price cuts....
The group also hopes to grow Waitrose & Partners’ profits for the full year, after its vegetarian food ranges and domestic wine proved popular with shoppers.
Here’s some Waitrose highlights from the festive period:
- Increased own brand and exclusive festive products, launching over 500 new and improved Waitrose & Partners lines. These included the new Honeycomb Bubble Dessert.
- A total of 25 new vegan and vegetarian products, such as Jackfruit Tacos were launched in the lead up to Christmas - helping drive a 94.3% increase in sales of vegetarian meals.
- English and Welsh wine continued its strong performance with sales growth of 21.4%.
- Free From products and dairy alternatives saw a rapid rise in sales - up 12.2% and 40.9% respective
Debenhams imposes hiring freeze at HQ
Debenhams has insisted it will deliver profits in line with expectations, despite a worse than expected fall in sales over Christmas (see 8am).
How? By delivering £30m more in cost savings.
My colleague Sarah Butler explains:
The struggling department store said it now expected to make total annual savings of £80m with new measures including a hiring freeze at head office and the earlier than expected closure of its Lodge Farm distribution centre in Northamptonshire.
Sales at established UK stores dived 6.2% in the 18 weeks to 5 January when overseas sales fell by 3.5% but online sales rose by 4.6%. The group fall of 5.7% was much worse than the 2% to 3% expected by analysts.
Debenhams said it had begun “constructive discussions” with lenders about refinancing but had put on hold attempts to sell assets including its Danish Magasin du Nord chain as it did not think the “value of the assets were being recognised.”
It said it was in talks with all stakeholders, including major shareholder Mike Ashley’s Sports Direct about its future but would not confirm if it was discussing taking up Ashley’s offer of a loan.
Debenhams said it had spoken to landlords about plans to close up to 50 stores and did not rule out the possibility of instigating a company voluntary arrangement which would allow it to agree a mass closure of stores under an insolvency procedure.
Christmas sales at both Debenhams and Marks and Spencer were dismal but note that their full-year profit guidance is unchanged (for now). Retailers have to shift stock, they also have to make money.
— Joel Hills (@ITVJoel) January 10, 2019
More early reaction to this morning’s blizzard of retail news:
Debenhams like-for-like sales drop of 3.6pc is actually below analyst forecasts but escapes profit warning after identifying "additional" cost saving opportunities. Although it's put sale of Magazin du Nord on hold as it explores bringing "new sources of funding into business"
— Ashley Armstrong (@AArmstrong_says) January 10, 2019
It hasn’t been Armageddon on high street at Christmas, as some feared. But this is v symbolic & proof as to how tough life is for many shops.
— Harry Wallop (@hwallop) January 10, 2019
The last time John Lewis didn’t pay a staff bonus was 1950s - during rationing https://t.co/KRKVWXw3Qk
Simon Underwood, business recovery partner at accountancy firm, Menzies LLP, says John Lewis’s results are disappointing.
“Despite modest growth in like-for-like sales - 1.4% - the retailer has said that it is expecting to report a fall in profits – clear evidence that depressed footfall and falling consumer confidence has led to some cut-throat discounting and promotional activity.
“At a time when many other retailers have been forced to downgrade their full-year profits, John Lewis had seemed immune to the problems facing the High Street. If monthly trading performances resume the erratic pattern seen during the last few months of 2018, things could change rapidly, and staff bonuses could be hit.
Looks as if the retail bounce might be over...
— Equitrade Capital (@EquitradeC) January 10, 2019
Marks & Spencer and Debenhams reported a drop in sales in the run up to Christmas and are trading down this morning, but Halfords are getting hammered, currently down -22.76%.#Retail #Reporting pic.twitter.com/APakYNH8sB
Here’s our full story on John Lewis:
Marks & Spencer’s shares have fallen by over 1% in early trading, after it reported that food, clothing and homeware sales fell in the last quarter.
Richard Lim, chief executive at Retail Economics, says M&S has done worse than expected, as it struggles to cope with the seismic changes in the retail sector.
It’s increasingly evident that Christmas is becoming an online event and these figures reaffirm the polarisation of shopping habits with online propping up the poor performance of their store sales.
This accelerating trend has benefitted the retailers that have the scale, capacity and seamless online operations to cope with the peak in demand over Christmas and M&S is struggling to keep up.
“Put simply, the retailer is burdened with too many stores, unsuitable space and the spiralling operating costs associated with this outdated business model. As a higher proportion of sales move online, the cost of fulfilling these orders are rising too. Set against the backdrop of fragile consumer confidence, it’s a difficult place to be.
Tesco shares are leading the FTSE 100 risers, up 1.9% at 216p.
Analysts are cheering its financial results (which includes a 2.2% jump in Tesco’s UK sales over Christmas.).
...so we've had profit warnings from Halfords and John Lewis and bad figures from M&S this morning. But Tesco is doing quite well: says the 2.2% growth in UK like-for-like sales over Christmas is the best in nearly a decade
— Julia Kollewe (@JuliaKollewe) January 10, 2019
Richard Hunter, head of markets at interactive investor, says Tesco’s recent acquisition of wholesale group Booker is paying off.
“Tesco has defied the retail gloom and delivered a pick of the bunch performance.
The supermarket behemoth has staged a strong recovery over several years, having previously admitted that it had taken its eye off the ball in its core UK market. There is a fair amount of light between then and now, with like-for-like sales both in terms of the third quarter but also the Christmas period showing continuing growth. The Booker acquisition is fast becoming a strategic triumph, with quarterly like-for-like sales having grown 11% and almost 7% in the festive run-up.
Tesco are standing out as the only retail winner this morning, while M&S, John Lewis, Debenhams and Halfords have all struggled.
Busy morning. Tesco Xmas sales up, better than expected. Firmly in the winners camp. M&S food, clothing and home sales down. Boss says numbers are where they expected to be as they transform the business. Debenhams figs are worst today - UK sales down 6.2% for 18 wk period
— Emma Simpson (@BBCEmmaSimpson) January 10, 2019
Profit warnings from John Lewis and Halfords, M&S clothing and food sales fall, as the retail death rattle continues
— Naomi Rovnick 歐蜜 (@naomi_rovnick) January 10, 2019
OOF! Shares in Halfords have plunged by a quarter at the start of trading, to their lowest level in over six years.
Halfords shares shed 78p to 216p, the lowest since August 2012, following its grim profits warning.
Card Factory is also suffering, with shares down 10% in early trading.
Updated
Even Christmas card sellers found last month tough.
The Card Factory has reported that like-for-like sales are down 0.1% this year.
Karen Hubbard, Card Factory’s chief executive officer, blamed the move towards online shopping and away from the high street.
“The Christmas trading period was challenging due to lower high street footfall. However, Card Factory performed robustly in this competitive trading period.
On Debenhams’ weak trading, Michael Mulligan, partner and insolvency specialist at law firm, Shakespeare Martineau, says:
“Debenhams’ trading figures further confirm the desperate state of the UK’s retail sector, which has suffered its worst Christmas for a decade. Whilst it’s a positive that the retailer had a stronger Christmas period, one good month unfortunately doesn’t make up for sub-par financial performance in the other eleven. Debenhams suffered the biggest losses in its trading history last year and doing a little better over Christmas will not allay stakeholders’ concerns. The festive sales are too little too late.
“The business has fallen foul of its decidedly mid-market position, unable to compete with the successful online retailers, high-end luxury stores or with the discounter end of the market, many of which are managing to keep their heads above water. Failing to report any financials since last autumn won’t have done the business any favours and is only likely to have fuelled speculation that this bad news was on the way.
Updated
Debenhams has also suffered a turbulent Christmas.
UK sales have tumbled by 6.2% over the last 18 weeks, and by 3.6% over the crucial festive period.
Debenhams blames thrifty shoppers, saying:
The UK trading environment has continued to be volatile, as expected, with clear evidence that our customers have been seeking out promotions.
Debenhams, which is deep in debt, adds that it has held “constructive discussions” with its lenders.
Debenhams like-for-like 6-week Christmas sales -3.4% (online +6%); 18wk sales -5.7% like-for-like; warns H1 margins to be eroded by discounting; continues to generate cash; reiterates FY guidance; in talks with lenders about refinancing; further asset sales on hold
— Mike van Dulken (@Accendo_Mike) January 10, 2019
Profit warning at Halfords
More gloom! Halfords has hit the City with a stonking profits warning.
Halfords, which sells car parts and bicycles, has reported that like-for-like sales fell by 1.7% in the last 14 weeks.
CEO Graham Stapleton says trading was tough.
“This has been a challenging third quarter for the business, driven by exceptionally mild weather and ongoing weak consumer confidence.
Together, these factors have led us to reduce our profit expectations.
Halfords has slashed its profit forecasts this year to £58-£62m -- City experts were expecting around £70m, I believe.
Halfords also warned that it doesn’t expect to do any better in 2019-20, due to weak consumer confidence.
Tesco is bucking the gloom. It says it enjoyed a strong Christmas, with UK sales up 2.6% over the Christmas period.
CEO Dave Lewis says Tesco is ‘bang on track’ with its plans this year.
The last time John Lewis suspended its staff bonus was in 1953!
They also suspended it during the second world war and in the 1920s, so it would be very significant if they ditch it this year.
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John Lewis: Staff bonus may be axed
Crumbs! John Lewis is considering axing its staff bonus this year, after seeing its profits slide.
The John Lewis Partnership, which owns Waitrose, has just warned that full year total Partnership profits will be “substantially lower this year”.
It blames slower sales growth, and tumbling profit margins as it cut prices.
Gross sales at the John Lewis Partnership did rise in the last seven weeks, by 1.4% year-on-year, including a 0.3% rise at Waitrose.
But that wasn’t enough to boost profits, given the “relatively weak consumer demand.”
In a serious blow to its workforce of partners, chairman Sir Charlie Mayfield has warned they may not get a bonus this year - for the first time in many decades.
Mayfield says:
The actions taken in recent years to prepare for the current pressures in retail mean that the Partnership has the financial strength and flexibility to pay a modest bonus this year, without impacting our ambitious investment programme.
However, the Board will need to consider carefully in March, following the usual process, whether payment of a bonus is prudent in the light of business and economic prospects at that time.’
After tough year John Lewis saying it "will need to consider carefully...whether payment of a bonus is prudent". That's despite pick up in sales over Xmas.
— Zoe Wood (@zoewoodguardian) January 10, 2019
Waitrose perhaps better than expected, up 0.3% LFL. John Lewis up 1%. Considering whether or not a bonus will be prudent 😬
— Bryan Roberts (@BryanRoberts72) January 10, 2019
Last year every John Lewis partner got a bonus worth 5% of their pay; a decade ago it was worth an extra 20%!
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M&S hit by falling food and clothing sales
Ouch! Marks & Spencer has reported another quarter of falling food and clothing sales.
Total like-for-like sales at M&S shrank by 2.2% in the last 13 weeks of 2018. That’s worse than the 1.6% expected by City economists.
Food sales - so often a success for M&S - shrank by 2.1% while clothing and homeware was down by 2.4%.
Steve Rowe, chief executive, is blaming “well-publicised difficult market conditions”, but insists that M&S’s transformation programme remains on track.
Rowe added:
The combination of reducing consumer confidence, mild weather, Black Friday, and widespread discounting by our competitors made November a very challenging trading period. However, overall our 13-week performance was steady with some early encouraging signs.
Worst Christmas trading in a decade
Good morning and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s a massive day for retail news, as Marks & Spencer, John Lewis, Tesco, Debenhams and Halfords all report how they fared over crucial Christmas trading period.
And it will have been tough. Britain’s retailers suffered their worst Christmas trading since the depths of the global financial crisis, as anxious customers held onto their money.
The British Retail Consortium has reported that sales were flat in December, the worst performance in December since 2008.
“Squeezed consumers chose not to splash out this Christmas with retail sales growth stalling for the first time in 28 months,” said Helen Dickinson, BRC chief executive.
This forced retailers to slash prices in an attempt to lure customers over the threshold, taking a big chunk out of profits. But even that wasn’t enough to get people splashing out....
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